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Yahoo leaks give few strategy hints September 26, 2012

Posted by David Card in Uncategorized.
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The impressions that are leaking out of Yahoo’s strategy presentation to its employees are pretty vague. Om is probably too harsh in reacting to their lack and to other sources, but there’s not a whole lot that seems new or counter-intuitive. Business Insider seems oddly better sourced than AllThingsD, but take it all with a grain of salt. Personalization seems to be the main theme, but with little on product or implementation of it. Projects will have to hew to a “rule of 100 million” (dollars or users?), which is perfectly sensible for a company of Yahoo’s girth. Acquisitions will be for talent rather than tech or businesses.

As I’ve written before, Yahoo has significant assets and should be salvageable, if not returned to a high-growth superstar. It has a big, still-loyal audience that uses it quite regularly for a broad mix of content and communications. It has the potential to be an advertiser or agency’s good friend in targeting mass-reach audiences in a variety of contexts. It should focus on quality content and brand advertising. It should use search primarily in support of its display advertising business. If Google comes a-knocking, it should answer the door, but Microsoft might still be a good partner, especially if Yahoo can get an even sweeter deal of of Redmond.

Yes, Yahoo’s ad targeting should be much better than it is, given the amount of data it should have been collecting about its users. Yahoo historically applied its personalization skills better on content than on ad support. There’s no way its home page will look like this. And if its premium content efforts result in corrections like the one in this NY Times story (confusing YouTube for Yahoo video), then it has a lot of work to do in getting the news out.


Small steps forward for social media advertising September 10, 2012

Posted by David Card in Uncategorized.
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Last week, Yahoo executives told several news outlets that, counter to earlier speculation and rumor, it was not going to sell its Right Media online advertising exchange, and that it was recommitting to ad technology investments. For all the product-focus talk surrounding new CEO Marissa Mayer, Yahoo appears to be continuing on a content plus ad network strategy similar to that of Aol. Or to MSN, for that matter. While not quite in the category of re-arranging the deck chairs on the Titanic, these machinations are peripheral to the real engine of online advertising – search – and the potential ad growth accelerator – social media.

Google comfortably dominates search right now, but Facebook is getting hammered for not growing social media ad revenues fast enough. A few months ago, I pointed out some of the realities of social media advertising: its volume comes from cheap inventory, big advertisers often spend more on their Facebook pages than on Facebook ads, and spending hasn’t exploded because the industry hasn’t really figured out how to harness social media for brand advertising.

But there has been some recent progress on the social media ad front. Nothing like a major breakthrough, but some promising steps forward, including:

Still not search

Social media has something of an inferiority complex. Much of the advertising that runs on social media is pay-per-click direct marketing that, even with targeting, suffers in comparison with search. It always will, as search is such a powerful indicator of active intent. Facebook knows that, but its search dabbling is just that – dabbling. Marketers can’t buy keywords yet, and unlike its display ad business, Facebook search advertising doesn’t offer scale.

App makers and brand page marketers are figuring out a few ways of getting value out of Facebook’s first paid search efforts, but Facebook is no threat to Google. While social signals can be a useful input into search results ranking, they’re no substitute for the heavy lifting of indexing and analyzing the content of the web. Facebook is smart to experiment with search, but it’s even smarter to focus its technical and support resources on brand advertising.

Question of the week

What else should social media companies do to accelerate ad revenue growth?

How vulnerable is Google? June 4, 2012

Posted by David Card in Uncategorized.
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Last week, Google received an ultimatum from the European Commission’s antitrust head. Simultaneously it re-introduced its vertical shopping search site as a pay-to-play program for merchants. Regardless of whether you think it is “evil” or not, Google has shown a lot of me-too products with lagging innovation. While it’s a mistake to characterize Google as a one-trick pony, it’s worth examining just how vulnerable Google may be in its core businesses.

There is no predicting how government regulations and lawsuits will turn out, but there’s no question Google faces a mess of them. Gigaom Pro analyst Greg Sterling thinks the EC may be bluffing a little, as it is offering Google a chance to accommodate or settle early, even as it threatens massive fines. Google has already made some changes to its controversial “Search and Your World” results page re-design that appeared to favor Google services in the name of personalization. There’s likely some more room for give and take, though Sterling’s probably right that Google will have to go to court over search neutrality. Meanwhile, Google probably won’t have much luck making Microsoft and Nokia look anti-competitive to European regulators. But at least Google appears to be winning its expensive battle with Oracle over Java copyrights and patents.

Google used to deride “paid inclusion,” whereby sites pay search engines to guarantee their content is indexed speedily. It denies that its revamped Shopping program constitutes paid inclusion, but Google is arguing semantics here. It is charging for listings, and it will show some of these listings on its mainstream search results page. Initial reactions from merchants and retailers are mixed. Some think the new program will offer better control and analytics, but no one knows what will happen to between Google Shopping and SEM, or how conversion rates might be affected.

Signs of desperation?

Is Google franticly searching for new revenues? Is that why it is replacing a free service with a paid one for the first time, and why it seems vulnerable to antitrust charges? Its core businesses seem safe, with spots of accelerating growth:

Google is trying to charge for some platform services – but API fees for Maps may chase developers to alternative suppliers. Likewise, much of Google’s Android success is based on its open source model. There’s pressure on search click-through volumes and pricing coming from mobile. Google says web search is increasing, but is cagey about sharing actual numbers. While it’s safe to assume mobile activity is additive to web activity now, that’s a condition that could change in 24 to 36 months. And mobile’s where the growth is. Google’s core businesses are pretty secure, but it needs to tap into new budgets to accelerate growth: brand advertisers are a better fit for its sales force than enterprise IT departments.

Question of the week

Where will Google find growth?

Priorities for Yahoo’s new CEO January 10, 2012

Posted by David Card in Uncategorized.
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Last week Yahoo announced it had hired Scott Thompson, currently the president of eBay’s PayPal business, as its new CEO. Thompson doesn’t have any media or advertising experience, and he is still stuck with Yahoo’s dysfunctional board. But he’s got product and technology cred, which means Yahoo should be fixable.

Being a portal that combined content, communications and web navigation used to be a great business. But search and social media have steadily eroded the value of a portal as a launchpad to the web, so Yahoo needs to focus on its current identity as a premium content destination site.

With that in mind, here’s what Thompson should do to get Yahoo growing again in order to retain its position as one of the biggest players in online advertising.

Top priorities

  • Forget about being a technology platform, a social media company or an ad network. Yahoo doesn’t have any compelling services it could deliver through APIs to an ecosystem of third-party apps. It is using Facebook effectively to promote its own content,  though it could do more with Twitter. And as much as I like the potential for a premium advertising exchange to raise the value of its remnant ad inventory, Yahoo should focus on doing that through better targeting and richer ad formats and sponsorships.
  • Target better. In theory Yahoo should have great marketing targeting ability based on analyzing all the information it has on its 700 million users: content interests and real-time behavior, authentic email identities, search behavior that is critical for retargeting display ads. Thompson may not be an ad guy, but he’s a data guy (he sits on the board of Splunk) and has said that data analysis will be key for Yahoo. I interpret that to mean Thompson must make Yahoo the best vehicle for targeting display advertising next to high-quality content. That means hiring big data scientists and investing in targeting and yield-management technology, and it sounds like Thompson’s on board.
  • Focus on brand advertising. Yahoo could adopt AOL’s big, rich media “Devil” ad format and then leave AOL in the dust with brand advertisers by servicing them and their agencies to death. It’s already at work on advertiser relations, but it needs to accelerate the process. Yahoo should hire more-expensive ad salespeople while Yahoo U.S. head Ross Levinsohn rebuilds relationships with advertisers and agencies. It should reassign the content farm team to creating quality sponsorship advertorials. Yahoo can also do more cross-media event sponsorships like its Sundance Film Festival promotion.
  • Bulk up on quality content. Lately Yahoo is less focused on selling itself than on unloading its Asian assets: There are tax advantages to trading those for other properties. Names like WebMD and The Weather Channel have come up, and they would both be great additions for Yahoo — WebMD for its task-focused ad-friendly audience and The Weather Channel for its everyday utility and cross-media opportunities. It might also want to look at youth or technology content brands that aren’t already part of bigger media companies; SB Nation is putting together an interesting network of properties.

Innovation opportunities

Thompson is already working on talent retention by talking up innovation. At PayPal, 40 percent of resources reportedly went toward projects with longer-term payoffs. Thompson might have a lot of ideas about e-commerce, but he should stay away from social commerce and the crowded daily deals space unless Yahoo can better target offers aggregated from third-party deal companies.

He is probably thinking hard about mobile, too. Rather than display ads, mobile advertising will likely center on search and offers for some time. There may be some opportunities for sponsored content. Yahoo’s phone efforts should focus on content and email rather than ads. Its IntoNow product — a sort of Shazam for TV — is truly innovative, and it presents ad syncing and interactive TV content opportunities that will pay off on tablets sooner than on phones (and way sooner than via Yahoo TV Widgets). Yahoo’s other new tablet app, the Flipboard-like Livestand, seems rough around the edges but supports the kind of big, glossy magazine-style advertising that Yahoo must deliver.

Here is how partners and competitors should evaluate Yahoo in the next six to nine months:

  • Big advertisers and agencies should get plenty of love from Yahoo, and they should demand proof of ad effectiveness. They should ask Yahoo to foot some of the bill for expensive media planning studies.
  • Google barely participates in brand advertising and seems happy to collect ad network fees rather than own more content inventory. Eventually, Google could try to replace Microsoft as Yahoo’s search technology supplier via its better conversion rates, but it might have to do more data sharing with Yahoo.
  • Facebook wants to raise the rates it charges for ads via targeted brand advertising but needs to offer better formats and sponsorships. Its role in content discovery is safe.
  • AOL and MSN need to execute a strategy similar to Yahoo’s, though each is more invested in being an ad network. Any Yahoo failure with brand advertisers is an opportunity for them.

Question of the week

What technologies should Yahoo acquire from outside?

Handicapping Facebook’s Next Billion-Dollar Business(es) May 2, 2011

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Amidst reports that it was having trouble unloading $1 billion worth of shares at a very rich valuation, Facebook last week tweaked an existing advertising service and started testing its first home-grown social commerce product: Facebook Deals. Will that be Facebook’s next billion-dollar business? Possibly. But it already faces stiff competition from Groupon and LivingSocial, not to mention a new Google entrant. More importantly, other growth- and revenue-generating opportunities exist that could be worth exploration on the part of Facebook, too.

Let’s examine each of these potential new revenue streams.

Big New Businesses for Facebook

Facebook dominates social media and the advertising spending that surrounds it. The company makes its money from low-priced display advertising (estimated at nearly $2 billion in 2010) and the 30 percent commission it takes from social gaming companies using Facebook Credits for virtual goods (forecast to be $250 million in 2011). Its three best new business opportunities are:

  • Rich-media brand advertising: To get at ad budgets that need more than the low-priced display ads driving social networks, Facebook needs to offer brand advertisers big, rich-media ad units like those of the New York Times and AOL. If it’s worried about user resistance, Facebook could show the ad only once a day, leave it over on the nearly empty right-hand sidebar or even reserve it for Friday movie openings and holiday promotions. Other than Yahoo, Microsoft and AOL, no other site has inventory with the audience reach for this kind of advertising, which commands $30-plus cost-per-thousand pricing and is usually sold out. This one should be a slam dunk.
  • Deals and social commerce: Facebook’s toe is barely in the social commerce water — it’s testing Deals in only five cities, sourcing some of the offers from partners and not charging merchants anything yet. Facebook is differentiating its deals by not demanding they be deeply discounted, and focusing on more social, shared-experience offers like restaurant deals or concert tickets. Local deals require an expensive local sales force that Facebook doesn’t have. While the company can deal directly with national retailers and merchants that target locally — a good opportunity otherwise — most of them don’t make the kind of “shared experience” products mentioned above.
  • Connect-based ad network: Unlike most ad networks, which make do with remnant ad inventory scraped from the bottom of online publishers’ barrels, Facebook has access to ready-made, desirable space through Connect services such as its Like button, sign-on and comments. Even without getting into behavioral targeting, Facebook could show ads targeted by context just like Google’s AdSense network. For example, it could serve up a hotel ad in an online newspaper’s travel section. If publishers balk, and weren’t cowed by their need for the traffic that Likes generate, Facebook could always share a piece of the revenue.

Potential Partnerships

I’ve talked about Facebook’s need for brand advertising and its potential to create an ad network before, and this piece by Jason Calacanis and his Launch team also likes those two opportunities and tries to put a dollar figure on their near-term revenue. He also suggests Facebook do in-stream advertising, which I suspect Facebook would deem too intrusive and competitive with Like messages and other promotions. Other potential revenue streams? Facebook has never charged for company pages (it sells them ads), I’m skeptical that it could do search effectively, and it has been very selective about data licensing.

But it needs partners to tap into the three new businesses identified above. Companies like:

  • Microsoft, already working with Facebook on search, who could build the ad network. These days, however, Microsoft seems focused almost exclusively on search after outsourcing some ad network functions.
  • Gilt Groupe, whose Gilt City deals unit is part of Facebook’s trials. Unlike other deal companies, Gilt also is a retailer, which could open other social-commerce doors.
  • Other online ad technology companies that could help Facebook’s advertising platform. Those that do data mining (e.g., Experian, Audience Science, BlueKai) and social targeting (e.g., Lotame, 33Across, Media6Degrees, Rapleaf) may need to do direct deals with Facebook to accommodate potential privacy legislation.

Question of the week

What will be Facebook’s next billion-dollar business?